FOS Blog

WHAT HAPPENED TO ETHICS?

WHAT HAPPENED TO ETHICS?

Recently, the FDIC softened its approval for Section 19 approvals which is required to insure a person is employable in the financial services industry. Section 19 prohibits a person convicted of any criminal offense involving dishonesty, breach of trust, money laundering or who has entered into a pretrial diversion or similar program from participating in the affairs of an FDIC-insured institution.

They now grant di minimis exceptions for convictions for issuance of insufficient funds checks of moderate value, small dollar simple theft, and isolated minor offenses committed by young adults. And drug-related offenses will be granted automatic FDIC consent when certain criteria are met. Some of that criteria includes:

There is only one conviction or program entry of record for a covered offense; and

The offense was punishable by imprisonment for a term of one year or less and/or a fine of $1,000 or less and the individual did not serve jail time; and

The conviction or program was entered at least five years before the application; and

The offense did not involve an insured depository institution or insured credit union. An offense based on the issuing of insufficient fund checks (bad checks) in an aggregate face value of $1,000 or less where no insured depository institution or insured credit union was a payee on any of the checks, will be considered as not involving an insured depository institution or insured credit union.

Now balance that against the rising number of prohibition orders against individuals in the banking industry:

An OCC order against a branch manager who made unauthorized withdrawals from the account of a Bank customer and a teller who transferred confidential information on 12 customers to a third party.

A former New Jersey EVP knowingly removed funds from a bank customer’s account without permission over a 3- year period.

A former Philadelphia SVP and Chief Lending Officer unilaterally approved a $625,000 loan to the bank’s largest borrower and the bank suffered a loss.

A former Boston banker made unauthorized withdrawals from 7 dormant deposit accounts and prevented the depositors from receiving their mailed statements.

This is exactly why every bank needs a meaningful ethics and code of conduct training program – not just upon initial employment but on an annual basis, as a regular reminder that there are consequences for wrongful behavior. And this is why every institution also needs at least an annual reminder of the Bank’s Whistleblower Policy. And this is why every institution needs a good internal audit program to detect abnormalities before the bank suffers an actual loss.

As an industry, we need to hold one another accountable to maintain the integrity and honor of our business. We’ve been entrusted with the life assets of our customers. Let’s guard their trust!